[2024] KETAT 745 (KLR)

Arunkumar v Commissioner of Domestic Taxes (Tax Appeal E141 of 2023) [2024] KETAT 745 (KLR) (9 May 2024) (Judgment)

Neutral citation: [2024] KETAT 745 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E141 of 2023

CA Muga, Chair, BK Terer, D.K Ngala, GA Kashindi & SS Ololchike, Members

May 9, 2024

Between

Kanjibhai Arunkumar

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a male adult of sound mind living and conducting business in Busia under the registered business name of Ladva Hardware.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 Laws of Kenya. Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all revenue. Under Section 5(2) of the Act with respect to the performance of its function under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Parts I and II of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. On 8th December 2022 the Respondent raised an additional assessment to the Appellant in respect of the year 2018 amounting to the principal amount of Kshs. 751,562. 72. The penalty in respect of this amount was Kshs. 37,578. 14 whilst interest was Kshs. 285,593. 83 bringing the total amount of tax demanded to Kshs. 1,074,734. 69.

4. Upon receipt of the assessment order, the Appellant raised an objection to the same on 12th January 2023.

5. Upon review of the objection, the Respondent issued its objection decision dated 6th March 2023 in which it rejected the notice of objection on the basis that the Appellant did not provide sufficient documentation and confirmed the assessment.

6. Aggrieved by the decision of the Respondent, the Appellant filed a Notice of Appeal dated 4th April, 2023 on even date.

THE APPEAL 7. The Appellant premised its Appeal on the grounds as set out in its Memorandum of Appeal dated and filed on 14th April, 2023 which were as follows:a.The Respondent erred in law and in fact by failing and refusing to amend the assessments in full despite the Appellant having lodged valid objection applications under Section 51 of Tax Procedure Act No. 29 of 2015 (hereinafter ‘TPA’).b.The Respondent further erred in law and fact by failing to deduct input tax to arrive at the correct tax liability of the Appellant with respect to the VAT assessments,c.The Respondent erred in fact and law by confirming and refusing to amend assessment number KRA20XXXX on grounds that the Appellant allegedly failed to provide sufficient evidentiary documents to support his objection application yet the Appellant provided all the necessary documents to support his objection application.d.The Respondent erred in fact and in law by failing to consider all of the evidentiary documents supporting the Appellant's case and objection raised.d.The Respondent erred in law and fact by failing to consider and/or completely disregarding the Appellant's right to notification of any errors in the filed returns and their subsequent right to amend the filed returns to reflect the correct position.

Appellant’s Case 8. The Appellant has set out its case in the Statement of Facts dated and filed on 14th April, 2023 in which it stated as hereunder.

9. The Appellant stated that upon receipt of the assessment order in respect to the 2018 year of income amounting to Kshs. 751,562. 72 on 8th December, 2022; the Appellant raised his objection to the said assessment on 12th January, 2023 on grounds that the Respondent, in its assessment failed to deduct allowable inputs in ascertaining the total VAT. The Respondent further failed to deduct input tax to arrive at the correct tax liability with respect to the VAT assessment.

10. The Appellant delivered documents including but not limited to his bank statements, receipts and invoices which he asserted, were sufficient to prove his case and objection.

11. To the Appellant's surprise, the Respondent issued an objection decision dated 6th March 2023 confirming the assessments and informing the Appellant that the documents availed were allegedly insufficient to prove that the assessment was excessive and tax demanded was punitive.

12. The Appellant asserted that the documents that he provided were sufficient to prove his case and that the Respondent's objection decision was issued in bad faith.

13. The Respondent violated Section, 17 (1) of the VAT Act No. 35 of 2013(hereinafter ‘VAT Act’) by not allowing the deductions of input tax on taxable supplies as illustrated in the VAT Invoice, as well as the purchases and sales ledger.

14. The Respondent erred in law and fact by failing to consider and/or completely disregarding the Appellant's right to notification of any errors in the filed returns and their subsequent right to amend the filed returns to reflect the correct position.

Appellant’s Prayers 15. The Appellant therefore made the following prayers to the Tribunal:a.That this Appeal be allowed.b.That the Tribunal sets aside the whole of the objection decision dated 6th March 2023. c.That the Tribunal sets aside the assessment order number KRA20XXXX.d.That the Appellant be discharged from paying the additional VAT and Income tax amounting to Kshs. 751,562. 72. e.Any other orders that the Tribunal may deem fit.

Respondent’s Case 16. The Respondent’s case was as set out in its Statement of Facts dated and filed 12th May, 2023 in which it stated as hereunder.

17. It raised additional assessments on the Appellant based on variances in declaration of incomes declared in VAT3 and income tax returns for the period January 2019 to December 2019.

18. It issued the Appellant with a notice of assessment dated 26th September, 2022. On 8th December, 2022 it issued an additional assessment to the Appellant. The Appellant objected to the assessments on 12th January, 2023 and provided incomplete sales ledgers and bank statements.

19. On 13th January,2023 the Respondent requested documents from the Appellant to support his objection via electronic mail. The documents requested included copies of invoices and s u p p l i e r statements, evidence of payment, complete sales ledger for the period assessed and any other documents necessary to prove the transaction.

20. The Appellant did not respond to the request and the Respondent proceeded to send a reminder via electronic mail on 24th January, 2023. A review of the objection was done with the documentation that had been availed and it proceeded to issue an objection decision dated 6th March, 2023.

21. The Appellant being aggrieved by the Respondent's decision confirming the additional assessment amounting to Kshs. 1,074,734. 69, filed this Appeal. The Respondent also specifically responded to the Appellant’s grounds of appeal and relied on the provisions of Section 31 (1) and 51 of the TPA.

22. It refuted each and every one of the allegations by the Appellant in the Memorandum of Appeal and Statement of Facts and averred that it is empowered to use its best judgment to arrive at a tax decision pursuant to the provisions of Section 30 (1) of the TPA which provide as follows:“(1)Subject to subsection (2), the Commissioner may, based on the available information and to the best of his or her judgement, make an assessment (referred to as an "advance assessment") of the tax payable by a taxpayer specified in section 26 for a reporting period.”

23. That p u r s u a n t to Section 56 of the TPA and Section 30 of the Tax Appeals Tribunal Act, No. 40 of 2013 (hereinafter ‘TAT’), the burden of proof lies on the Appellant to demonstrate that its decision was incorrect. It further stated that the burden w a s n e v e r d i s c h a r g e d a s the documentary evidence availed was not sufficient to enable it come to a different conclusion on the Appellants liabilities.

24. The A p p e l l a n t ’ s g r o u n d f its Appeal, t h at t h e Respondent failed to deduct input tax was spurious, since the Appellant had the window of providing documents to support his objection. The Appellant could not fault it for relying on the available records to assess and confirm assessments after several failed attempts to acquire all the necessary records. The Appellant was suffering the consequences of not keeping accurate documents.

25. Section 31(1)(c) of the TPA provides for amendment of assessments as follows:-“Subject to this section, the Commissioner may amend an assessment (referred to in this section as the "original assessment") by making alterations or additions, from the available information and to the best of the Commissioner's judgement, to the original assessment of a taxpayer for a reporting period to ensure that-……..(c)in any other case, the taxpayer is liable for the correct amount of tax payable in respect of the reporting period to which the original assessment relates.”

26. The Respondent averred that it considered all the available information and its findings were limited to the information available during the verification. Section 51 of the TPA provides that a notice of objection is treated as validly lodged by a taxpayer under subsection (2) on the following basis:“(a)the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments;b.in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33(1); and(c)all the relevant documents r e la t in g t o the objection have been submitted.”

27. Section 56 (1) of the TPA places the onus of proof in tax objections on the taxpayer who in this case failed to avail evidence that would support a contrary assessment or that would have guided the Respondent at arriving at a different objection decision. The Section provides as follows:“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

28. The Appellant, upon being requested supporting documents on various occasions failed to provide crucial documents. As a result, the assessment was made based only on the available information provided by the Appellant and the best judgement by the Respondent. Section 59 of the TPA empowers the Respondent to require production of such documents vide issuance of notice as deemed necessary in determination of tax liability. The Section provides as follows:“(1)For the purpose of obtaining full information in respect of the income of a person or class of persons, the Commissioner may, by notice in writing, require, in the case of the income of a person, that person or any other person, and in the case of a class of persons, any person -a.to produce for examination by the Commissioner at the time and place specified in the notice, any accounts, books of account, and other documents which the Commissioner may consider necessary; and the Commissioner may inspect such accounts, books of accounts or other documents and may take copies of any entries therein……..”

29. The Respondent relied on Section 56(1) of the TPA provides that the burden of proving that the tax assessment is wrong lies with the taxpayer and the Appellant herein failed to prove to the satisfaction of the Respondent that the assessment was wrong.

Respondent’s Prayers 30. Reasons wherefore the Respondent prayed that based on the above grounds and others that may be adduced at the hearing, the Appeal be dismissed with costs to it and the objection decision dated 6th March, 2023 be upheld.

PARTIES’ WRITTEN SUBMISSIONS 31. In his written submissions dated 29th November, 2023 and filed on 1st December, 2023 the Appellant submitted on two issues that he had identified for determination whilst in its written submissions dated 11th December, 2023 and filed on 13th December, 2023, the Respondent submitted on and analysed two issues that it had identified for determination. The Tribunal however notes that it will not rehash the submissions of both parties where these were repeated from the statement of facts.

32. The Appellant analysed the issues he had identified for determination as outlined hereinunder:i.Whether t h e Respondent Raised the Additional Assessment Without Issuing the Relevant Statutory Notice.

33. The Appellant at paragraph 3 of his Statement of Facts asserted that the Respondent made and issued the additional assessment order without issuing the necessary statutory assessment notice.

34. Section 31(8) of the TPA provides as follows:“When the Commissioner has made an amended assessment, he or she shall notify the taxpayer in writing of the amended assessment and specify-a.the amount assessed as tax or the deficit or excess input tax carried forward, as the case may be;b.any amount assessed as late payment penalty payable in respect of the tax assessed;c.any amount of late payment interest payable in respect of the tax assessed;d.the reporting period to which the assessment relates;e.the due date for payment of any tax, penalty or interest being a date that is not less than thirty days from the date of the taxpayer received the notice; andf.the manner of objecting to the assessment.”

35. The Respondent on the other hand, at paragraph 4 of its Statement of Facts alleged that it issued the Appellant with a notice of assessment dated 26th December 2023. Nonetheless, the Appellant submitted that the Respondent failed to provide any proof whatsoever of the existence of the alleged notice and that the same was in fact given or served to the Appellant.

36. It was therefore the Respondent’s obligation to prove the existence of the alleged notice and that it was in fact served upon the Appellant. Section 107 of the Evidence Act, CAP 80 of Kenya’s Laws (hereinafter ‘Evidence Act’) provides that whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist.

37. Based on the above, the only logical conclusion that can be arrived at is that the Respondent failed to adhere to the mandatory obligations of Section 31 (8) of the TPA.

38. The Appellant submitted that Section 17 (1) of the VAT Act provides as follows:“Subject to the provisions of this Act and the regulations, input tax on a taxable supply to, or importation made by, a registered person may, at the end of the tax period in which the supply or importation occurred, be deducted by the registered person in a return for the period, subject to the exceptions provided under this section, from the tax payable by the person on supplies by him in that tax period, but only to the extent that the supply or importation was acquired to make taxable supplies.”

39. The Appellant upon receiving the additional assessment order raised his objections on 12th January 2023 on grounds that the Respondent violated Section 17 (1) of the VAT Act by not allowing the deductions of input tax on taxable supplies as illustrated in VAT invoice, and the purchases and sales ledger.

40. The Appellant also sought the amendment of VAT returns for January 2019, February 2019 and April 2019 in accordance to Section 31 of the TPA but the Respondent disallowed and rejected the Appellant’s objections on grounds that the Appellant did not provide sufficient supporting documents to support his claim and objection.

41. The Appellant submitted that the Respondent had in this case neither denied disallowing allowable VAT deduction nor refused to amend the subject assessment in both his Statement of Facts and the objection decision. In fact, the main and only reason for making the subject objection decision was the alleged failure by the Appellant to provide the necessary supporting documents capable of adequately supporting his objection. Allegations that have been vehemently refuted by the Appellant.ii.Whether the Appellant provided sufficient documents to support his objection application.

42. The Appellant submitted on this issue that the only question remaining was whether he had provided enough evidence capable to support his objection. In support of his objection, the Appellant delivered documents including but not limited to his bank statements, receipts and invoices which he asserted, were sufficient to prove his case and objection. This fact had been partly admitted to by the Respondent at paragraph 6 of its statement of facts.

43. The Appellant maintained that the information and documents that it gave to the Respondent were the same documents that it has relied on in this Appeal and that the same supported both his objection and the Appeal.

44. Nevertheless, the Respondent at paragraph 7 of its Statement of Facts alleged that it requested copies of invoices and supplier statements, evidence of payment, complete sales ledger for the assessed period and any other documents to prove the transaction on 13th January 2023.

45. The Appellant noted that the said allegation was misleading, given that the referred annexure KRA 3 which is contained at pages 8, 9, and 10 of the Respondent’s Statement of Facts is in fact the objection decision and not the alleged correspondence. The Appellant further submitted that, the same appears to have also been marked 4 on top of or below the 3. Thus, the Respondent did not provide any evidence to support the claim made at paragraph 7 of the Respondent’s Statement of Facts because they simply did not exist.

46. The Respondent proceeded to make and issue the subject objection decision on grounds that the Appellant did not provide sufficient documents to support his objection. As earlier averred, the Appellant submitted that it is trite law that he who alleges must prove. It was the submission of the Appellant that he had in accordance with the provisions of Section 56(1) of the TPA, successfully adduced positive evidence capable of proving his case and that the additional assessment was excessive and erroneous.

47. The Respondent also failed to substantiate the allegation that it had specifically requested for the documents referred to in paragraph 7 and that the same were not provided. The Appellant maintained that the documents that were provided to the Respondent during the objection stage and now during the Appeal were adequate to support his case and that the allegations to the contrary as made by the Respondent were made in bad faith.

48. The Appellant submitted that the objection decision by the Respondent was neither just nor proper as it was issued without considering the Appellant’s supporting documents despite the same having been provided to the Respondent and as such it must be set aside and the Appellant discharged from paying any taxes thereof.

49. The Respondent identified two issues for determination in its submissions which were as follows:i.Whether the Respondent’s charge to tax on the Appellant was proper in law.

50. That its objection decision was made pursuant to the provisions of Section 51 of the TPA which provides as follows:“(8)Where a notice of objection has been validly lodged within time, the Commissioner shall consider the objection and decide either to allow the objection in whole or in part, or disallow it, and Commissioner's decision shall be referred to as an "objection decision".9. The Commissioner shall notify in writing the taxpayer of the objection decision and shall take all necessary steps to give effect to the decision, including, in the case of an objection to an assessment, making an amended assessment.10. An objection decision shall include a statement of findings on the material facts and the reasons for the decision.10. The Commissioner shall make the objection decision within sixty days from the date of receipt of a valid notice of objection failure to which the objection shall be deemed to be allowed.”

51. That its objection decision in substance and effect, complied with the requirements in the foregoing provisions and the said decision was communicated to the Appellant and included a statement of findings explaining why the amendments were made by the Respondent.

52. In raising the assessments, it was guided by Section 31 of the TPA pursuant to which it has power to make assessments based on information available to it and to the best of its judgement. The Section provides thus:-“(1)Subject to this section, the Commissioner may amend an assessment (referred to in in this section as the “original assessment”) by making alteration or additions from the available information and to the best fo the Commissioner’s judgement, to the original assessment of a taxpayer for a reporting period…”

53. That what would constitute the Respondent’s best judgement was dealt with extensively in the case of Commissioner for her Majesty’s Revenue and Customs TC/2017/02292 Saima Khalid Appellant vs. The Commissioners for Her Majesty’s Respondents Revenue and Customs at paragraph 29 where in the Tribunal set out the following requirements for a decision to be to the best of HMRC’S judgement:“the very use of the word judgment makes it clear that the commissioners are required to exercise their powers in such a way that they make a value judgement on the material which is before them. ….Secondly, clearly there must be some material before the commissioners on which they can base their judgment. If there is no material at all it would be impossible to form a judgement as to what tax is due.Thirdly, it should be recognised, particularly bearing in mind that primary obligation to which I have made reference, of the taxpayer to make a return himself, that the commissioners should not be required to do the work of the taxpayer in order to form a conclusion as to the amount of tax which to the best to their judgment is due. In the very nature of things frequently the relevant information will be readily available to the taxpayer but will be very difficult for the commissioners to obtain that information without carrying out exhaustive investigations. In my view, the use of the words ‘best of their judgment’ does not envisage the burden being placed on the commissioners of carrying out exhaustive investigations. What the words ‘best of their judgement’ envisage, in my view is that the commissioners will fairly consider all material placed before them and on that material, come to a decision which is one which is reasonable and not arbitrary as to the amount of tax which is due. As long as there is some material on which the commissioners can reasonably act then they are not required to carry out investigations which may or may not result in further material being placed before them.” (Emphasis by the Respondent)

54. The Appellant availed bank statements and an incomplete sales ledger to support its objection. That on different dates namely 13th January and 24th January, 2023 it requested the following documents from the Appellant and the Appellant failed to respond to the correspondence:-a.Copies of invoices and supplier statements.b.Evidence of payment.c.Complete sales ledgers for the period assessed.d.Any other documents to prove the transactions.

55. The Appellant failed to provide the documents that showed the assessment as being erroneous or invalid and in the absence of any evidence provided by the Appellant to support its position, the Respondent properly exercised its best judgement in rejecting the notice of objection.

56. It relied on the case of TAT No. 70 of 2017 Afya X-ray centre vs. Commissioner of Domestic Taxes, in which the Tribunal held as follows:“From the foregoing chain of events, it is our understands that the Appellant failed in its duty in providing documents in order that a comprehensive analysis of tis affairs is done. Accordingly, the Respondent can hardly be faulted for raising the assessment in accordance with the availed documents…”

57. In addition, it also relied on the case of TAT Appeal no. 538 of 2021 Greenroad Kenya Limited Vs. Commisisoner of Domestic Taxes, in which the Tribunal at Paragraph 52 and 53 held that:“The Tribunal’s considered view is that the failure by the Appellant to avail the documents requested granted the Respondent the power to use its best judgement as provided for under section 31 (1) of TPA which provides that:-“subject to this section the Commissioner may amend an assessment (referred to in the section as the “original assessment”) by making alterations or addition from the available information and to the best of the Commissioner’s judgment to the original assessment of a taxpayer for a reporting period.”In view of the foregoing, the Tribunal makes a finding that the Respondent’s assessment and objection decision are proper in law.”

58. From the foregoing the Respondent asserted that it demonstrated before the Tribunal that what was considered in arriving at the assessment and subsequently the objection decision which were within the law. Moreover, the Respondent explained in detail, reasons why and its finding and prayed that the Tribunal would uphold the same. Against this backdrop, the Respondent submitted that the assessment was hinged on the letter of the law and it was upon the Appellant to provide evidence to support its assertions against the assessment at the objection stage. a fact it admittedly did not consider.ii.Whether the Appellant discharged its burden of proving that the Respondent’s decision was erroneous.

59. The Respondent submitted as follows in analysing this issue for determination that it had identified:

60. That contrary to the Appellant’s assertion that the Respondent erred in law and fact to consider all the evidentiary documents supporting its case, the Respondent submitted that it requested the Appellant severally to furnish the relevant documents to warrant a different decision which it failed to provide.

61. It requested and reminded the Appellant vide an electronic mail to avail the documents to enable it ascertain the correct tax position. The Appellant, however, only availed bank statements and incomplete sales ledgers which were insufficient to prove that the Respondent’s assessment was excessive and the tax demanded punitive to the Appellant.

62. Pursuant to the provisions of Section 24 (2) of the TPA, the Respondent is not bound by the returns filed by the Appellant or any information provided by or on behalf of the Appellant in assessing its tax liability and is allowed to use any information available in making the assessment which was the case therein to enable the Respondent ascertain the correct tax position as was in the instant case.

63. The Appellant had a duty under Section 51(3) (c) of the TPA to provide all relevant documentation in support of his objection. Moreover, Section 23 of the TPA mandated the Appellant to maintain documents required under any tax law and to provide the same upon request by the Respondent to ensure that its tax liabilities could be readily ascertained. The Appellant failed to provide the relevant supporting documents to discharge the burden of proving the assessment was incorrect.

64. It is further empowered under Section 59 of the TPA to require production of such documents as deemed necessary in determination of a taxpayer’s tax liability. The Section provides as follows:-“For the purposes of obtaining full information in respect of the tax liability of any person or class of persons, or for any other purposes relating to a tax law, the Commissioner or an authorised officer may require any person, by notice in writing, to—a.produce for examination, at such time and place as may be specified in the notice, any documents (including in electronic format) that are in the person's custody or under the person's control relating to the tax liability of any person;b.furnish information relating to the tax liability of any person in the manner and by the time as specified in the notice;c.attend, at the time and place specified in the notice, for the purpose of giving evidence in respect of any matter or transaction appearing to be relevant to the tax liability of any person.”

65. Section 56(1) of the TPA places the onus of proving a tax objection on the Appellant who in this instant case failed to avail documentary evidence that would have guided the Respondent at arriving at a different objection decision. The Section provides as follows:-“In any proceedings under this part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

66. The Respondent relied on the decision in Pearson vs. Belcher CH.M Inspector of Taxes) Tax Cases Volume 38 referred to by Justice D.S. Majanja in PZCussons East Africa Limited Vs. Kenya Revenue Authority (2013) eKLR to the extent that:“where there is an assessment made by the Additional Commissioner upon the Appellant; it is perfectly settled by cases such as Norman Va. Galder 267C293, that the onus is upon the Appellant to show that the assessment made upon him is excessive and incorrect and of course he has completely failed to do . That is sufficient to dispose of the appeal which I accordingly dismiss with costs.”57……the Appellant in the present appeal has manifestly failed to discharge such an onerous burden of proof placed squarely on it…”

67. In the instant case the Appellant failed to prove that the Respondent’s tax decision was in any way inconsistent based on extraneous factors, excessive or incorrect by failing to avail documents. It maintained that it followed due process and reviewed the documents availed by the Appellant in confirming the assessment.

ISSUES FOR DETERMINATION 68. The Tribunal having considered the parties’ pleadings, documents and submissions puts forth the following single issue for determination:Whether the objection decision dated 6th March, 2023 was justified.

ANALYSIS AND FINDINGS 69. The Tribunal wishes to analyse the issue identified for determination as hereunder.

70. This dispute arose from the Respondent’s assessment of additional VAT as indicated on the assessment order dated 8th December, 2022 in respect of the 2019 year of income. The amount assessed was in relation to VAT. The Appellant, in its pleadings has referred to the year 2018 but the Tribunal wishes to correct the fact having reviewed the documents and notes that the dispute was with respect of the 2019 year of income. The Respondent found variances between the income declared in the Appellant’s tax returns and its VAT3 returns.

71. The Tribunal notes that the Respondent maintained that the Appellant did not provide evidence at the objection stage and only availed a bank statement and incomplete sales ledger. The Respondent further maintained, in its pleadings, that the documents provided by the Appellant in any case were insufficient.

72. The Tribunal also finds that the Respondent referred to electronic mails dated 13th January, 2023 and another on 24th January, 2023 through which it had informed the Appellant of additional documents that it ought to have provided to essentially prove the incorrectness of the tax decision.

73. Section 56 (1) of the TPA provides as follows:“(1)In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

74. The Tribunal cites the case of Mbuthia Macharia vs. Annah Mutua Ndwiga & Another Civil Appeal No. 297 of 2015 [2017] eKLR, wherein the Court of Appeal when dealing with the issue of burden of proof observed as follows:“The legal burden is discharged by way of evidence, with the opposing party having a corresponding duty of adducing evidence in rebuttal. This constitutes evidential burden. Therefore, while both the legal and evidential burdens initially rested upon the Appellant, the evidential burden may shift in the course of trial, depending on the evidence adduced. As the weight of evidence given by either side during the trial varies, so will the evidential burden shift to the party who would fail without further evidence”

75. The Tribunal finds that the Respondent claims to have provided the Appellant with a list of documents in the said electronic mails dated 13th and 24th January, 2023, respectively. However, the electronic mail correspondence were not adduced as evidence in the pleadings.

76. In this regard, the Tribunal finds that the Appellant discharged its burden of proof and that the evidentiary burden therefore became that of the Respondent who ought to have been more specific about the type of information it required in order for it to classify the documentation provided by the Appellant as sufficient. The Appellant adduced evidence in the form of a bank statement, invoices and ledgers with its documents, which in the view of the Tribunal ought to have been considered by the Respondent rather than dismissed as being insufficient.

77. The Tribunal relies on the case of Commissioner of Domestic Taxes v Trical and Hard Limited (Tax Appeal E146 of 2020) [2022] KEHC 9927 (KLR) (Commercial and Tax) in which it was held as follows:“I agree with the Tribunal’s holding that the burden of proof in tax matters is not stationary but is like a pendulum swinging between the taxpayer and taxman at different points but more times than not swings towards the taxpayer. The uniqueness of our tax system in placing the evidential burden of proof on the tax payer is neither a mistake nor is it unconstitutional. …..”

78. It is also notable that the basis of the objection decision was that the documents provided by the Appellant were insufficient. If that was the case, the Tribunal fails to understand the Respondent’s action of proceeding to issue an objection decision in which it did not invalidate the Appellant’s objection.

79. Since the Respondent failed to invalidate the Appellant’s objection, it follows and is probable that the Tribunal can only find that the Appellant indeed provided the requisite documentation and the same may have been sufficient to enable the Respondent make a correct objection decision.

80. The Respondent on the other hand is unable to prove why or how it concluded that the documents provided by the Appellant were insufficient. It is the finding of the Tribunal that the mere assertion by the Respondent that the documents were insufficient is not proof. The Respondent after making such an assertion needed to be more specific about the reasons why the documents provided by the Appellant were insufficient and could not enable it to make its objection decision.

81. The Tribunal notes that the provisions of Section 107 of the Evidence Act which are as follows:“107. Burden of proof1. Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.2. When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.”

82. The Tribunal finds that the Respondent failed to establish that the Appellant had not discharged its evidentiary burden pursuant to Section 56(1) of the TPA and accordingly, the Tribunal finds and holds that the objection decision dated 6th March, 2023 was not justified.

FINAL DECISION 83. The upshot to the foregoing is that the Appeal is meritorious. Consequently, the Tribunal makes the following Orders:-a.The Appeal is hereby allowed;b.The objection decision dated 6th March, 2023 is hereby set aside;c.Each party to bear its own costs.

84. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF MAY, 2024CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBERDELILAH K. NGALA - MEMBERGEORGE KASHINDI - MEMBERSPENCER S. OLOLCHIKE - MEMBER